Roundup: What are challenges facing Africa's "historic" free trade agreement?

by Lyu Tianran, Frank Kanyesigye and Mohammed M. Mupenda

KIGALI, March 21 (Xinhua) -- African leaders on Wednesday signed the agreement to establish the African Continental Free Trade Area (AfCFTA), but officials and experts said challenges including poor infrastructure and protection of local industries could face the deal's enforcement.

The signing took place at the African Union (AU) Extraordinary Summit on the AfCFTA in Kigali. The agreement will be submitted for ratification by state parties before it can enter into force.

HISTORIC SIGNING

Chairperson of AU Commission Moussa Faki Mahamat called the day a "historic day", which marks a new step in Africa's march towards greater integration and unity.

AU Chairperson and Rwandan President Paul Kagame also said "this is a historic pact, which has been nearly 40 years in the making, and it represents a major advance for African integration and unity."

Some participants of the summit from the private sector in and outside Africa also voiced their support to the establishment of the AfCFTA, aimed at creating a single continental market for goods and services with free movement of businesses and investments.

Africa, which has a series of sub-markets, can use this opportunity to create one market of significance, said Stephen Roux, Chief Executive Officer of Dragon Tree Capital, an Australian corporate advisory firm.

The AfCFTA will make Africa the largest free trade area created in terms of numbers of participating countries since the formation of the World Trade Organization, according to the AU. The AfCFTA could create an African market of over 1.2 billion people with a total GDP of 2.5 trillion U.S. dollars, the pan-African bloc said.

It will progressively eliminate tariffs on intra-African trade, making it easier for African businesses to trade within the continent and cater to and benefit from the growing African market, said the AU.

WHAT ARE THE CHALLENGES?

Yet officials and experts have named several challenges that the AfCFTA could face after the signing.

Poor infrastructure across the continent is one major barrier to development and trade in Africa and may become a challenge during the AfCTA's implementation, Vera Songwe, Under-Secretary-General of UN, told Xinhua on the sidelines of the extraordinary summit.

AfCFTA may also pose challenges for governments in promoting competition in local markets as some local companies that are taking advantage of economies of scale may grow faster than others and capture dominant positions in markets, said Songwe.

Fast tracking the ratification can be another challenge and transformational changes brought by the AfCFTA may face resistance, Rwandan Minister of Trade and Industry Vincent Munyeshyaka told Xinhua in an interview.

Munyeshyaka said there is also a need to promote investment along with the AfCFTA, as investment may not follow its creation.

The creation of the AfCFTA should be followed by industrialization and infrastructure policies across Africa, Munyeshyaka said.

If African countries want to significantly increase intra-African trade, they must address practical issues such as streamlining regulations, improving access to finance by the private sector, infrastructure networks and simplification of customs processes, according to Louise Mushikiwabo, chairperson of the AU Executive Council and Rwandan foreign minister.

The institutional arrangement of each country may not work effectively for the AfCFTA, said Charles Kayitana, a senior lecturer in economics and development management at the University of Rwanda.

He also said different levels on products production in each country could also pose a challenge to the AfCFTA.

Kwesi Quartey, deputy chairperson of the AU Commission, said the challenges could include protection of local industries.

This could include using unnecessary non-tariff barriers to protect local industries and curb imports of certain goods, said Quartey.

Quartey said, however, this would not be a big problem since African leaders are committed to creating a single African market. Enditem